Are some stations permanent victims of consolidation?

[BostonRadioListener]

I read some of the legitimate issues raised here about individual Boston radio stations and how several seem like orphaned children almost neglected by its owners who own the cluster because of the crown jewel “station down the hall”

Industry question for the group:

Has large-scale consolidation actually reduced the marketability/liquidity of individual radio stations?

Pre-consolidation, a Boston signal might have had dozens or even hundreds of conceivable buyers. Today, many stations appear economically dependent on cluster synergies — shared engineering, sales staffs, traffic, management, marketing, office infrastructure, digital operations, etc.

If that’s true, then spinning off a standalone station may now require a buyer to recreate a large amount of operational overhead that previously existed at the group level.

At the same time, ironically, many of the large cluster operators themselves have become highly leveraged and financially stressed, with some moving in and out of restructuring or bankruptcy. So not only may individual stations have a smaller buyer universe, but even the pool of potential cluster buyers may now consist largely of companies already carrying significant debt burdens and limited financial flexibility. That may not be able to buy even if they’d like to.

So has consolidation unintentionally narrowed the buyer universe at both the station and cluster level — making radio assets less liquid and potentially less marketable overall outside a group structure?

 

[secondchoice]

From a technical standpoint it's not black and white. You are not required to have actual physical studios, sale folks can work at home, production can be done almost anywhere there is Internet, voice tracking could allow access to talent without the expense of moving folks, most of the bigger broadcaters have sold their towers to "tower companies" so you should able to keep the station's site, you mght have a little more engineering expense with a "service" but a lot of operations share engineers who are not in market.

Will the cluster owners sell a station to someone who is going to become competition? I seriously doubt it. That's why KLove and the other religious operators are a viable option.

IMHO the clusters where allowed to get too large. I know somebody is going to bring up the fact that half of the stations were loosing money before 80 90. I personally believe with a sales expense of around 40% you should be able post a profit unless the area can't support the station. The problem is the legacy cost of Wall Street and other speculators. If you can't make money with 3 stations in a market you need to find something else to do. The allocations belong to the Government/ taxpayers / people. They should never have been allowed to be an asset in Bankruptcy. That would kept the speculators from driving up the cost of ownership. A bankruptcy organization should have been an "unfit owner" and given a year to sell the stations or the license goes back to the FCC to auction off. (More money for the taxpayers). Would there have been some stations shut down most likely if they are not viable maybe, but if a bankrupt operator is facing selling a station or losing it I am sure the trustee would take a "free market far price" rather than give the license to the FCC and receive nothing.

The Internet will not kill radio, TV was supposed to do that decades ago. It's the creation of content or entertainment that will keep any form of media alive.

 

[BostonRadioListener]

Excellent points —appreciate the thoughtful response— especially about how technology has lowered some of the traditional operational barriers. You’re absolutely right that a station today can technically function with far less physical infrastructure than in prior decades.

But I still wonder if the larger issue becomes competitive scale even more so than operations.

Even if a standalone operator can now run lean technically, they’re still competing against clusters that spread sales management, promotion, digital resources, engineering , back-office functions, and advertiser relationships across multiple stations.

So the question may not be “Can a standalone operator exist?” but rather “Can one compete effectively at scale in a major market like ours, Boston, against heavily clustered operators?”

Your point about Wall Street/speculative leverage is also fascinating and spot -on.

 

[secondchoice]

I don't know about Boston, but in Atlanta* The Fish (I am not counting the Salem AMs) was a stand alone FM. They were usually a top 10 (6+).

Actually IMHO with the most of the market money controlled by agencies, as long as you do well (top 3 or better) in a money demo the agencies that are targeting those demos should buy. Of course you can't bundle flanker stations like the big operators do.

*I am pretty sure The Fish in Dallas TX did well too.

 

[davideduardo]

From a technical standpoint it's not black and white. You are not required to have actual physical studios, sale folks can work at home, production can be done almost anywhere there is Internet, voice tracking could allow access to talent without the expense of moving folks,

But a local independent has to have some kind of facility to use for business and production That means some staff, insurance, utilities, rent, legal, taxes and permits, FCC counsel, engineering, etc., etc.

most of the bigger broadcaters have sold their towers to "tower companies" so you should able to keep the station's site, you mght have a little more engineering expense with a "service" but a lot of operations share engineers who are not in market.

Lots and lots of AM directionals and even single tower AMs are not useful, due to tower companies. So, plenty of station have their own towers still. And in places where "everyone" is up on a hill or mountain, the tower rental firms just put up´their own towers and don't have to buy.

Will the cluster owners sell a station to someone who is going to become competition? I seriously doubt it. That's why KLove and the other religious operators are a viable option.

Generally when a cluster owner sells it involves the AM daytimer, the AM with a directional, or the limited signal FM. Of course, selling to a non-com makes it a non-competitor.

IMHO the clusters where allowed to get too large. I know somebody is going to bring up the fact that half of the stations were loosing money before 80 90. I personally believe with a sales expense of around 40% you should be able post a profit unless the area can't support the station.

Sales expense is vastly less than 40%. In small markets, with no agency business, it's likely around 15% to 20% including benefits and any perks.

The problem is the legacy cost of Wall Street and other speculators. If you can't make money with 3 stations in a market you need to find something else to do. The allocations belong to the Government/ taxpayers / people. They should never have been allowed to be an asset in Bankruptcy. That would kept the speculators from driving up the cost of ownership. A bankruptcy organization should have been an "unfit owner" and given a year to sell the stations or the license goes back to the FCC to auction off. (More money for the taxpayers).

The auctions take place many years apart, so the community loses a voice.... particularly bad if the problem was not viability but a bad owner or manager. Or worse, the single owner became ill or died and fell into hard times. In single station markets, that is the end of local radio.

Or take a market where the one local industry closes... the plant, the packer, the mine. Not the owner's fault but a bankruptcy may give a fresh start and not deprive the town of service.

The Internet will not kill radio, TV was supposed to do that decades ago. It's the creation of content or entertainment that will keep any form of media alive.

The internet will kill AM and FM radio. It already is. Billing as an industry is already off by about 70% in inflation adjusted dollars since Y2K and listening is off from an average of a 20% average share to today's 5% average.... a 75% loss in AQH listening.

 

[secondchoice]

But a local independent has to have some kind of facility to use for business and production That means some staff, insurance, utilities, rent, legal, taxes and permits, FCC counsel, engineering, etc., etc.

Lots and lots of AM directionals and even single tower AMs are not useful, due to tower companies. So, plenty of station have their own towers still. And in places where "everyone" is up on a hill or mountain, the tower rental firms just put up´their own towers and don't have to buy.

Generally when a cluster owner sells it involves the AM daytimer, the AM with a directional, or the limited signal FM. Of course, selling to a non-com makes it a non-competitor.

Sales expense is vastly less than 40%. In small markets, with no agency business, it's likely around 15% to 20% including benefits and any perks.

The auctions take place many years apart, so the community loses a voice.... particularly bad if the problem was not viability but a bad owner or manager. Or worse, the single owner became ill or died and fell into hard times. In single station markets, that is the end of local radio.

Or take a market where the one local industry closes... the plant, the packer, the mine. Not the owner's fault but a bankruptcy may give a fresh start and not deprive the town of service.

The internet will kill AM and FM radio. It already is. Billing as an industry is already off by about 70% in inflation adjusted dollars since Y2K and listening is off from an average of a 20% average share to today's 5% average.... a 75% loss in AQH listening.

I was just posting (like the original posting) about top 10 markets.

I guess I should have made the distinction FM. Unless it's a specific page about AMs I and most folks in the business never think of them as viable except to keep Translators "legal".

You are correct AM is mostly dead except in large markets with multiple AM signals that are actually cover most of the market and 1070 in Memphis which I am someday going to listen to see how they are doing as well as they are.

You take a client out to eat. COVID proved you don't really have to have an office. In a Top 10 market a large percentage of the commercials from agency come pre-recorded If you can voice track you can just as easily read a script for rush jobs.

Until you start making money (except for your personal Million dollars personal liability or umbrella insurance) you don't need insurance because what is their to take? Just make sure you don't "void" the Sub Chapter S financial separation. An easier solution from my personal experience was: Every station I worked at (except one) always traded out insurance for advertising.

The existing one year limit on STA shutdowns pretty much will wipe out a small broadcaster with bad health no matter how many stations he / she has unless there is a succession plan which every small business should have.

If the ridiculous debt load wasn't there and a town takes a major hit financially, the station might survive if it's economically possible. Actually if you have debt and the only thing the creditor will get is used equipment he might want to work with the station and keep it going not liquidate it. Kinda like Cumulus has done to their debt holders.

Economics is a dismal science. If the commission puts an allocation (FM) within 18 months of the Bankruptcy filing assuming nd nobody bids then that FM allocation or AM station is not viable.

One definition of insanity is doing the same thing over and over and over expecting a different result. Somehow the debt has to go away.


IMHO Radio should be a low capital entry business. Not controlled by organizations that have failed (bankruptcy) multiple times. I realize some debt holders will lose, but that's Economics.

 

[BostonRadioListener]

<<IMHO Radio should be a low capital entry business. Not controlled by organizations that have failed (bankruptcy) multiple times. I realize some debt holders will lose, but that's Economics.<<

This is the catch 22. Scale across hundreds of stations gives each individual station lower shared operating costs.

But the players that can offer that scale—are highly indebted players who’ve flirted with bankruptcy.

 

[davideduardo]

You take a client out to eat. COVID proved you don't really have to have an office. In a Top 10 market a large percentage of the commercials from agency come pre-recorded If you can voice track you can just as easily read a script for rush jobs.

That is agency business. A standalone lower rated station does not get agency business, and agency buyers won't "take lunch" with small low rated stations.

A low rated station will have mostly local direct accounts. That needs a recording faculty, production library of some sort and at least minimal multi-track capability.

Until you start making money (except for your personal Million dollars personal liability or umbrella insurance) you don't need insurance because what is their to take?

You need a lot more than $1 million in liability today if you are in business. And you need insurance if you rent anywhere, and you need fire and theft. You need insurance in case anyone is injured on your property.

Just make sure you don't "void" the Sub Chapter S financial separation. An easier solution from my personal experience was: Every station I worked at (except one) always traded out insurance for advertising.

Getting harder and harder, but yes you can trade some things.

The existing one year limit on STA shutdowns pretty much will wipe out a small broadcaster with bad health no matter how many stations he / she has unless there is a succession plan which every small business should have.

In the current state of radio, even small stations in big markets can't afford the legal costs of such forward planning.

If the ridiculous debt load wasn't there and a town takes a major hit financially, the station might survive if it's economically possible. Actually if you have debt and the only thing the creditor will get is used equipment he might want to work with the station and keep it going not liquidate it. Kinda like Cumulus has done to their debt holders.

Small stations have always found financing hard for the station itself. But the property of the station may be financed, such as equipment leases or loans, real estate loans, etc. None of those lenders are known for flexibility.

Economics is a dismal science. If the commission puts an allocation (FM) within 18 months of the Bankruptcy filing assuming nd nobody bids then that FM allocation or AM station is not viable.

But look at all the time off the air. That is not the FCC's objectives... they want stations on and giving service. Your theory depends on someone else wanting the channel. Today, they don't.

One definition of insanity is doing the same thing over and over and over expecting a different result. Somehow the debt has to go away.

Debt is a basis for all business. To paraphrase Jack Welsh, borrow someone else's money but only if the projected profit margin is greater than the interest rate.

IMHO Radio should be a low capital entry business. Not controlled by organizations that have failed (bankruptcy) multiple times. I realize some debt holders will lose, but that's Economics.

With radio in such dire straits, why install further restrictions? Let the marketplace thin the herd if that is the need.

 

[PTBoardOp93]

Has large-scale consolidation actually reduced the marketability/liquidity of individual radio stations?

Yes, without a doubt. Your pool of potential buyers is typically quite small, basically just the operators who already exist in the station's market.

Look at WEPN 98.7 in New York. It's supposedly been for sale for years with no buyers. Neither iHeart nor Audacy can buy it due to the market cap, and after them there aren't obvious buyers. MediaCo and SBS could buy it, but haven't, potentially due to their financial troubles. Good Karma, the former tenant for WEPN, also could have bought it instead of leasing WHSQ, but they didn't find Emmis's price attractive.

It seems unlikely that operators known for working in medium markets like Townsquare or Saga are prepared to jump into a major market like NYC. And so WEPN waits... and waits.

You could imagine a lower tier signal selling to someone independent. If iHeart wanted to sell Talk 1200, that would be an easier sale than WBZ-FM, just because the purchase price would be a LOT lower.

 

[secondchoice]

That is agency business. A standalone lower rated station does not get agency business, and agency buyers won't "take lunch" with small low rated stations.

A low rated station will have mostly local direct accounts. That needs a recording faculty, production library of some sort and at least minimal multi-track capability.

You need a lot more than $1 million in liability today if you are in business. And you need insurance if you rent anywhere, and you need fire and theft. You need insurance in case anyone is injured on your property.

Getting harder and harder, but yes you can trade some things.

In the current state of radio, even small stations in big markets can't afford the legal costs of such forward planning.

Small stations have always found financing hard for the station itself. But the property of the station may be financed, such as equipment leases or loans, real estate loans, etc. None of those lenders are known for flexibility.

But look at all the time off the air. That is not the FCC's objectives... they want stations on and giving service. Your theory depends on someone else wanting the channel. Today, they don't.

Debt is a basis for all business. To paraphrase Jack Welsh, borrow someone else's money but only if the projected profit margin is greater than the interest rate.

With radio in such dire straits, why install further restrictions? Let the marketplace thin the herd if that is the need.

I realize that you will never agree to anything but further consolations until the only remaining commercial operator in the USA goes bankrupt and the lenders say screw it and shut down every commercial radio station in the US.


IMHO the inability to try something different for a dying industry guarantees a quicker death of radio.

I believe you started stations with virtually no listenership and did well in the ratings and the agency money followed. Are you are saying that can't be done again.

BTW I had a claim and got a judgement against a LLC. To make a long story short One of the best law firms in the State couldn't recover any significant funds because the millionaire owners managed to keep a "legal and financial" separation.

 

[TheBigA]

Has large-scale consolidation actually reduced the marketability/liquidity of individual radio stations?

The question ignores the 20 years of history that preceded consolidation. By the 1990s, the "marketability of individual radio stations" had already been reduced. That's why the heritage owners had all been selling their stations. By heritage owners I mean those who were there in the first 20 years, such as NBC, GE, and National Life. These were companies that saw the value of their stations decline due to market competition, brought on by the FCC adding more stations and the explosion of FM radio in the late 70s and 80s.

By the end of the 80s, it was almost impossible to achieve enough market share with one station to make money. That's why the owners demanded an end to the 7-7-7 rule. An AM-FM combo, even in a market the size of Boston, was unable to get a 10 share. In the 60s and 70s, a single AM station could get more than a 10 share. So my point is that by 1988, competition from other stations had reduced the marketability of individual radio stations to the point where the only solution was to allow owners to buy more stations in a market in order to get the same share they had in the 60s. In that way, consolidation was the solution to the over-licensing of the spectrum that that killed the golden goose.

So the question may not be “Can a standalone operator exist?” but rather “Can one compete effectively at scale in a major market like ours, Boston, against heavily clustered operators?”

They couldn't exist before consolidation. That's why they demanded an end to the 7-7-7 rule in the 80s. Single station shares had been diluted to the point where it was impossible to make money owning a single station.

Now we're in a situation where radio is competing against unregulated digital media. I can own as many digital stations as I want. That further dilutes the audience pool. The number of people using traditional radio is a fraction of what it was. So once again, owners need more stations just to stay where they were.

 

[secondchoice]

<<IMHO Radio should be a low capital entry business. Not controlled by organizations that have failed (bankruptcy) multiple times. I realize some debt holders will lose, but that's Economics.<<

This is the catch 22. Scale across hundreds of stations gives each individual station lower shared operating costs.

But the players that can offer that scale—are highly indebted players who’ve flirted with bankruptcy.

The owner of this site

Look at WEPN 98.7 in New York. It's supposedly been for sale for years with no buyers.

And so WEPN waits... and waits.

If you bought a station a decade ago and sell it, you will not get your money back. The owner believes he can recover a get a price that similar stations sold for in the past. Not going to happen.

If he offered the station with no minimum bids, I bet several folks would make an offer. There might even be a small bidding war if a couple of big ego folks are involved. (WABC FM?) but I seriously doubt it will be half of want KLove paid.

The current ownership can afford to wait hoping for some kind of miracle.

 

[secondchoice]

<<IMHO Radio should be a low capital entry business. Not controlled by organizations that have failed (bankruptcy) multiple times. I realize some debt holders will lose, but that's Economics.<<

This is the catch 22. Scale across hundreds of stations gives each individual station lower shared operating costs.

But the players that can offer that scale—are highly indebted players who’ve flirted with bankruptcy.

Those costs don't have to be that large of a percentage in a top 10 market where most of the money is agency controlled. Google "radio station automation" or contact Lance who owns this site. A Voice tracking gig in a top 10 market will get a lot of folks that want to move up from smaller markets. You just have to be a good judge of talent.

You don't have to have studio anymore so the servers can be anywhere. The only good thing about COVID was the US learned how to work at home.

BTW I can count on one hand how many clients actually visited a station to buy commercials. The sales folks almost always did business at the client's office or emailed contracts. I have never seen an agency employee face to face. Lots a phone calls and emails however.

The correct programming can make a singleton FM work in a major market. Salem did well with the Fish in Atlanta and Dallas TX. The only problem is finding the next CCM format is going to be.

 

[TheBigA]

Look at WEPN 98.7 in New York. It's supposedly been for sale for years with no buyers.

The current ownership can afford to wait hoping for some kind of miracle.

Here's the real story: In 2023, Emmis made an offer to its stockholders to take the company private. The offer would increase every year for 3 years.

Stockholders OK Jeff Smulyan’s Plan To Take Emmis Private.

Shareholders of Emmis Corp. have given CEO Jeff Smulyan the greenlight to achieve his long-desired goal of taking the company private. During its annual meeting Tuesday in Indianapolis, stockholders voted

www.insideradio.com

Emmis needs the $50 million from the sale of that one station in order to buy back the shares. Right now, that offer is $7.25 per share. But the stock is currently trading at $1.75. So he is waiting for that offer to expire before selling the station. He knows he won't get as much money as he needs. But he also knows that he can buy the stock back for less money when his 2023 offer expires. That will be this August.

Back to the topic of this thread, the reason station values are declining isn't because of consolidation, but because of competition. It goes back to supply and demand. The demand for older technology like broadcasting is dropping due to high costs, declining revenues, and regulation.

 

[secondchoice]

IMHO part of the "high costs" is legacy debt. Are the music clearance fees that much higher for OTA radio stations verses streaming stations. Except for the electric bill, the costs could be about the same as on line only station. You can use software to keep your costs as low as the on line competitors. I am sure Lance will take care of you. A decent OTA FM signal in a top 10 market should generate enough revenue to at least cover the electric bill and associated costs.

The Cookie cutter formats with the 7 plus minute commercial breaks are killing radio with the under 30 folks. My son listens to UTube music. He says OTA has too many commercials. I listened 2 or 3 songs about a minute of commercials. He says he can accept that because he doesn't have to wait that long for a song.

I know radio plays the quarter hour game so that might not work. But at least have your OTA talent tease the next song or "coming up 30 minutes of non stop music".

 

[TheBigA]

My son listens to UTube music. He says OTA has too many commercials.

Name all the DJs on YouTube music. You can't because there are none. If broadcast radio was more like YouTube and Spotify, they could run fewer commercials. I believe the future of broadcasting will sound more like streaming. That's what the recording industry wants.

If people had to subscribe and pay for broadcast radio, it would sound very different. Until that happens, there will be commercials, because that's the only revenue stream they have. They can't put their signals behind a paywall the way Sirius does.

Your post addresses the costs. What about declining revenues? How can broadcast radio increase revenue to cover increased costs due to inflation? They can't charge more because audience size is in decline. Audience size is in decline because of increased competition. How do you solve that problem? What people ignore when they complain about consolidation is the 1996 act came about at the same time as the internet.

 

[secondchoice]

If someone has a better plan to stop the insanity of organizations using the Bankruptcy laws to prop up failing bussinnes model. I sure would like to hear it.

 

[TheBigA]

If someone has a better plan to stop the insanity of organizations using the Bankruptcy laws to prop up failing bussinnes model. I sure would like to hear it.

The insanity isn't using bankruptcy laws. That's why they're there. The insanity is investment companies loaning money to broadcasters. Nobody forces them to lend money to radio companies. The banks stopped lending money to radio companies a long time ago.

They all know the track record. They all know that stations aren't increasing in value. The all know broadcasting isn't a growth business. Yet investment companies continue to provide the money. They're doing it for TV too. Look at Nexstar. Makes no sense. A fool and his money are soon parted.

 

[davideduardo]

I realize that you will never agree to anything but further consolations until the only remaining commercial operator in the USA goes bankrupt and the lenders say screw it and shut down every commercial radio station in the US.

There are many stations in every size market that are so limited that no possibility exist for them to be successful, irrespective of the owner. While a few very bad facilities find a niche with religious or ethnic programming, the rest, such as daytimers without translators, highly directional high end of the AM band stations, suburban stations that do not cover a full market and similar situations are just not going to make it

Up to now and for the last seven decades or so, unprofitable stations seem to have been able to find a willing buyer even if prior attempts to make them successful have failed. As we are seeing with the Emmis FM in New York City, even some very good facilities can’t find willing buyers.

Personally, I do not believe that further consolidation will make things any better because the available advertising money for Radio is shrinking each year. Add in the reduced use of radio itself particularly by those under 40 and we have fewer ad dollars and much less listening time.

IMHO the inability to try something different for a dying industry guarantees a quicker death of radio.

This comment is posted frequently, but nobody has come up with an idea on how to “try something different.“ What do you think that radio as an industry should do to revitalize itself?

I believe you started stations with virtually no listenership and did well in the ratings and the agency money followed. Are you are saying that can't be done again.

The stations I built from scratch were all superior technical facilities in markets with large populations. Each launch was accompanied by a significant promotional campaign. That is not the same as a 500 W daytime on 1570. And, using the first market I owned stations in there were 40 competitors, and I immediately had the number one station in upper and middle income groups. On the other hand, there were several dozen stations in the same market, barely getting by because they did not have an audience. Any advertiser wanted to reach.

 

[Kent]

IMHO the inability to try something different for a dying industry guarantees a quicker death of radio.

What would this "something different" be? Far as I can tell, it sounds like you're wanting to go back to the future. We had strict ownership limits previously, and flooding the market with new signals while the advertising pool dwindled turned out to be a bad idea. Another problem was the audience liked the extra choices.

I believe you started stations with virtually no listenership and did well in the ratings and the agency money followed. Are you are saying that can't be done again.

It might be doable again, but that has never been the norm. Every radio station was once somebody's dream; the vast majority of them turned into nightmares. That was how we got into this mess of consolidation in the first place.